Smeck Capital Management Services
Protected Property Hedge Fund
Our Protected Property Hedge Fund has been designed to provide investors with the benefits of investing into the UK Property Market whilst removing many of negatives that buying property directly themselves generate. Furthermore this fund offers a 100% capital protection policy for risk adverse clients. Please note however, that the capital protection option charges a premium which reduces potential capital gain. Furthermore, this fund is only designed for institutional investors. Retail investors can only gain indirect access to the fund through participation into the Smeck Capital Property Bond.
Benefits of investing into Property?
Property investing has traditionally outperformed many other asset classes and has shown to be a suitable hedge compared to holding all funds in equities as there is only a weak correlation between the different asset classes. When buying into property directly for investment purposes the investor encounters a number of drawbacks compared to equity investments. This fund seeks to remove many of these associated drawbacks.
What are these drawbacks form a traditional property investment?
There are a multitude of issues a prospective investor needs to evaluate when purchasing a property.Many of these issues have a negative connotation. Such drawbacks include liquidity, time, risk and lack of scale. There may also be a potential lack of knowledge in terms of how the property sector works.
Buying property reduces liquidity significantly. Your money is tied up into the property until you decide to sell. However, through investing into a fund you have access to your funds at all times. Whilst this is a matchmaker service requiring another to fill take your position before leaving, we nether the less allow a swift exit, due to a number of institutions who are waiting for an opening. As such Smeck Capital Financial Services has a commitment of returning funds to investors within a period of 14 working days after the client requests this.
Buying a property is a lengthy process in terms of identifying then acquiring the correct property, maybe arranging finance, insuring the property and then finding suitable tenants. However investing directly into a fund these issues are taken on by the management team. Your funds are simply pooled together with other investors then we identify the best property to buy into for our clients to provide above average returns.
Whenever people invest into any asset class there is always a risk. However, when investing into a specific property there are specific risks attached to that property. The purchased property may have unforeseen problems which makes this a poor investment despite the UK property markets overall resilience. Problems could be structural or simply a problem tenant. Yet by pooling into a collective fund, should one property under perform then the other investments will ease this burden.
Lack of Scale
Usually the top performing investments into property are larger scale projects. This typically means developing a block of apartments or commercial buildings where the real returns are made in the development side, not just organic growth in the property market as a whole. Due to the size of these types of developments, this area is usually outside of the scope for the average investor. Yet by investing into a fund an investor can participate in such an developments and gain exposure to the development side which has more profit potential.
There is a well know investment adage which is “invest into what you know”. Simply put this means that when you invest into something which you understand you have a higher chance of being successful. Our fund manager and project management team at Northern Trust Capital Markets has an in-depth knowledge in the property market, having completed a number of successful developments, which have delivered outstanding returns.
Investing into a property fund has a number of advantages compared to direct property investment. This section seeks to explain how this fund works in generic terms.
How does it work?
Like most funds investors buy shares into the fund. These share can go up or down in value over time. When the investor decides to sell, they can sell at the price that the shares are trading at. Because this fund is Open Ended you can sell your shares at any time as you do not need to find a buyer to sell out of the position. In addition, investors have the option to buy a Capital Protection Policy. This will payout should the fund be in a negative position when you decide liquidate. In return the insurer will take 30% of profits you make in the fund. This Capital protection Policy is designed for the more risk adverse investor. Investors seeking higher returns may decide not to enter into this contract. Please note that due to the exceptional performance of this fund there is currently a significant queue and entry into the fund is unlikely in the near future.
What does the Fund invest into?
The fund can invest into any property project providing that it is based in the UK. Typically, most projects sourced are larger developments which offer higher upside potential. This fund also uses leverage. The Smeck Capital Markets Property Fund has the capacity borrow up to 70% from bank for finance. As a result the banks will take a first charge the developments until they are fully repaid. in addition, Smeck Capital Financial Services also offers an Asset Backed Property Bond to increase leverage further. As a result, investors into the fund are able to acquire a substantial amount of exposure to the property market relative to their amount of funds invested. This has the effect of generating very strong returns to date.
What is the Northern Trust Property Bond?
This property bond gives clients who are seeking an income an option to gain a higher yield compared to savings and corporate bonds but with firm safe guards to protect your capital. Yields range from 7.5% to 9.5%. There is also a full capital protection option, with a slightly lower yield.
What are the fees?
Like most of our funds we only take a performance fee when we make our investors money. Our performance fee is set at 25% of profit attained from investing into projects after all costs have been deducted. Contact your relationship manager to obtain further information.
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